There is a rhythm and routine to retail as Buying, Planning and Merchandising teams navigate their own retail cycles to plan and trade their product areas.
However, the efforts put into planning before a season begins result in the buzz of finding out how your products actually sold, and whether this was in line with how you planned things.
As a result, alongside a small amount of trepidation, most seasoned retailers love a Monday morning when, despite knowing daily sales the previous week and having instant access to performance information provided by so many data intelligence solutions, they take the time to formally review their trading performance.
Which metrics are used to measure retail sales performance?
The first thing to look at is the total sales taken for the previous week – but for that to be meaningful it must be compared with other measures which are usually the forecast, the plan or budget and the sales for the same week last year.
This gives us a great initial view of the week – but we need to know so much more, for example:
- What are the stock positions?
- What’s due to come into the business over the next few weeks?
- Were the sales taken at full price, or were they reduced?
- When looking at what we bought, what % have we sold through so far?
- Are our stock positions versus LY and plan inline with our sales performance?
Then once we have that information, we drill down through the hierarchy to find out how all the various product categories performed and whether our selling locations (stores, websites or third parties) had similar sales profiles, or if some other factors drove a different result.
Whether looking at a high level or right down at product line level, there are some key calculations that most retailers use to assess sales performance.
Read on as we explain what each of these metrics is, how they are calculated, and how they help you make better decisions when it comes to reporting on your sales performance.
Rate of sale (ROS)
Rate of sale (ROS) is widely used and describes the speed of sales relative to how many selling locations the product is held in and how long it has been selling for. In simple terms, it measures the average number of units sold per week.
Whilst it is best practice to use ROS as a planning measure pre-season, here we are going to look at its most common use as a measure of performance in-season.
ROS can be applied to an individual product or group of products, and to a store, group of stores or any other sales channel like a website.
How to calculate ROS
To work out the rate of sale (ROS) once the season has begun to trade, the calculation is:
Unit sales ÷ number of weeks on sale ÷ number of stores or locations
For example, if you have sold 3300 t-shirts over the past 6 weeks and they are stocked in 50 stores, then the rate of sale is 11.
A high rate of sale indicates strong performance.
Sell-through
Most retailers will have a target sell-through which is directly linked to their ambitions for acceptable levels of terminal stock at the end of the season and their markdown budget.
A sell-through refers to the proportion of a product that has sold, in relation to how much was bought, and is calculated as a percentage.
How to calculate sell-through
(Number units sold ÷ number of units bought) x 100 = sell through (%)
For example, if 100 units are bought and 90 sell, the sell-through is 90%.
A sell-through of 90% means that 10% is left and may need to be cleared another way. This brings us to ‘total sell through’ versus ‘full price sell through’.
- As the name suggests ‘full price sell-through’ reflects sales taken at full price
- Total sell-through can be for all sales, whether they were full-priced or reduced
Knowing the full price sell-through is useful as it indicates what customers were motivated to buy before they were encouraged by a promotion or a markdown.
Like-for-like (LFL) sales
LFL or like-for-like (also known as same store sales, or comparable/comp sales), measures the natural growth a retail business achieves from its existing space and stores. It excludes the impact of new store openings or closures and reports “same store” sales year-on-year.
Similarly for online retailers, the same measurement can be applied if the impact of new or divested business is excluded.
How to calculate LFL sales
Like-for-like growth is usually calculated by measuring the sales increase or decrease within selling locations that have been open for at least two years.
If a retailer is experiencing a period of growth as a result of new business activity, additional space or even acquisition, like-for-like gives a real measure of underlying performance excluding these strategic initiatives.
Balance to achieve (BTA)
The BTA, or balance to achieve, is a measure used partway through a financial period, which compares the performance achieved so far with that expected in the remaining weeks. It is often further compared to the same set of sales from last year or from the plan.
How to calculate BTA
For example, if we consider a retailer saying, ‘We are 4% up on the year to date, but the BTA sales forecast is +8%’, this indicates a very different forward projection from the performance we know about so far.
This may still be an accurate picture, but the BTA position would need to be analysed and validated, and if there is insufficient evidence that performance will improve to +8% then possibly the forecast should be reduced to a more realistic picture.
The retail maths is not enough on its own
Of course, these metrics are just the beginning. The skill is in understanding the data you have, what the story behind the numbers is and what is causing the performance to be the way it is. And then, critically, in making decisions to address any poor performance or to maximise the success of strong performance – which is why retailers need both Finance and Merchandising capability.
Learn more about managing and calculating margins, and measuring and managing stock performance by reading the other articles in our “retail jargon” series.
Build confidence and capability in B&M
If you need a helping hand understanding margin terms and calculations, we also have a handy free toolkit which includes a glossary of over 300 retail terms and acronyms explained, along with bite-sized video explainers for 14 essential retail calculations.
Already have the basics covered? Then why not consider our Evaluating Trading Performance course which is aimed at entry-level Buyers, Merchandisers and Planners and takes you through the best practice way to evaluate your performance and take the right actions.
You can find full details of all our expert-led courses and classroom-based workshops in the First Friday Training Academy.
